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Okay friends, we are back with another reaction video . It is very popular among our subscriber community. We always post the kind of videos you want to see . Many people on Instagram and Twitter are messaging us asking for more reaction videos . That's why, we're doing them. I haven't watched this video yet .
I don't even know what the title of this is. I don't usually watch videos, but they prepared this for me . Here's a white screen , but now we're going to respond . I don't know. Tim said I shouldn't get too upset about this, let's see. Okay, what is this video about? Peter Lynch. There you go . It's going up.
There is no good reason for this. Yes, absolutely. Well, let 's look at the Magellan Fund, run by Peter Lynch, one of the greatest investors of all time. We have a special guest with us . Can we call him a legend? I think so . Legendary investor Peter Lynch. He is with us from Boston this morning to share his thoughts on the economy, markets, and his work for the Catholic Schools Foundation .
Peter has been Vice Chairman of Fidelity Management Research and a member of the Fidelity Funds Advisory Board since 1977 . Now, I want everyone to notice one thing . Take a look at this growth. I can't show this properly . Look at this growth here . You know what Peter Lynch would say ? What he's saying is, " Look, I made 28% a year, but my average investor made less than 10% , because people bought at the wrong time and sold at the wrong time." This is exactly like Ark Investments .
Even looking at the growth of Ark Investments over the last 5 years , the average investor in Ark has lost 30 or 40% . Why? Because when excitement builds , they pour money into it , and usually that's when they get overjoyed. Let's move forward . From 1977 to 1990, he managed the Magellan Fund. By the time of his retirement, in 1990, it had increased from $20 million to $14 billion .
Peter taught us to invest in what you know, which is great. This word is often used in investing. It's a pleasure to be here. Besides, this time it was different. Let's talk about investing in what you know . I'm very curious to know what you think about the economy these days. Well, I think people are investing in individual stocks , which is very sad, they are very careful when buying a fridge or a plane ticket, but what can I say?
What can I say? I want to pay full price for cars and I'm tired of seeing people bragging about how much money they saved . They research a car and save $1,000 , but when it comes to stocks, they buy a stock at any price because they think it's a good company . That's definitely true. Thank you very much, Mr.
Lynch. He is talking about the refrigerator. But what he said was true. People spend hours researching to save $14 and choose the best refrigerator . But when it comes to stocks, they think, " Okay, this company is really good, so this is the future." Let's move forward. They are very careful with their money , but will spend five or ten thousand dollars on a stock they heard about on the bus .
They didn't even know what they did, so one time my friend was playing basketball at our house, and a friend we both knew mentioned a company . He immediately invested $20,000 on the spot and bought shares of that company , which then fell by 40% . And we know those two people . That's so amazing. Yes.
You really have to be careful . Look at the company, examine the balance sheet. What is the reason why this stock price should increase? Just because the price is going up is not a good reason to buy. Do you think this investment style you started with is still feasible and profitable ? In my opinion, it's important to look for new things and look at companies with a good story.
I mean, did anyone expect TJX, a local company, to grow this much ? TJ Maxx. That would be great . Or Stop and Shop will grow 10 times, or Analog Devices or Nvidia, I can't even say Nvidia. So, you need to find a company that is going to rebound or a company that is going to grow, like Panera or Family Dollar Stores.
I'm not saying buy these now , but this is the reason companies like Sears are going down . So, Kmart fell, IBM slowed down . However, new companies keep coming . That is, it is natural. You need to look for new companies and look at the balance sheet. If you know that five plus five equals close to ten , you can look at the balance sheet and tell which of these two companies with the lower price is better.
A company has 3 million in cash and no debt. Another has a debt of 3 million and no cash. What will you buy? That is, it is not that difficult to do. Look, I've been watching you very closely because I was in the same business back then. Do you remember how many S&Ls you made a lot of money back then, switching from mutuals to stock trading?
I mean, I don't know if you left any of them out. They all achieved great success . All of them brought big profits . They were all great winners back then . What is your opinion on the current economic situation and what has happened? We saw in the case of the First Republic , you have a good grasp in that field, so I would like to know your insight .
Yes, we had a terrible financial crisis from '99 to '01 . I think almost every major bank in Texas has closed . The Bank of New England, one of the oldest banks in the country, also closed. That means in '08 and '09, banks were giving out loans, second mortgages, and home improvement loans without any documentation, and people were buying boats with them.
Now banks are being very cautious. So, we have seen other crises in the past as well. Some banks may close. Interview. 400 banks closed after '08 and '09 . Now we have stress tests . I think the banking system has improved . Some companies keep closing . This is natural. That's its nature. Imagine the years '79, '80, '81, we had double-digit inflation and double-digit unemployment .
And people thought Japan would rule the world. That is, we have no hope . Tell me. What does this look like, Mo? Yes, you are talking about China. Yes, everyone seems to be saying that China will rule the world . For one thing , I think China has a greater chance of becoming the number one economy in the world than Japan , because Japan was already a rich country at that time.
China is still in the early stages. Guess how much sleep this makes me lose? Not at all. Zero. This is very strange . I noticed one thing . When you listen to people like Buffett, Munger, Greenblatt, they're not using big words . They are only using very basic common sense . Maybe that's why the average person thinks, "Yeah , they don't understand the point." Because they're not trying to look smart or use big words.
There was an insurance salesman in the past, now a wealth manager in our town, who used the word 'depreciation' when selling me an insurance policy. I looked at him and asked, " What's the connection between insurance policies and depreciation?" I asked. Then he closed his mouth. We laughed, and our friend looked at him and said, " You shouldn't come here without knowing anything, but look at him." In fact, if you add five and five and get close to 10, you can calculate the value of a company.
This is so... maybe he's joking . Five plus five is ten . Even if you get close to it, say nine or eleven, how can five plus five be wrong? The important thing is that anyone can read the balance sheet. Anyone can learn financial reporting . That's why we have this. That's why we have this channel. But those stupid people out there, the Tom Nashes, the other financial fools...they're really nosy, you know?
Not one person can add five plus five . The stock market can't add five plus five. Maybe his cat will come. Yes, maybe his cat will come. All these ignorant fools complicate things to appear intelligent . I do n't want to seem smart. I am really smart . I know that. But the smart thing about me is that I keep things simple.
Keep it simple, idiot. That is the right way. I look at a business like a person , evaluating it based on their assets and liabilities . If you earn 10 million a year, have 100 million in the bank, and no debt, that is a very different situation than if you earn 1 lakh a year, have 10 lakh in debt, and 5 lakh in assets.
That's a very simple thing. Are there no deep things in this? Absolutely . But if you keep it simple, you'll do just fine. That's all you have to do. Let's move forward. I mean, you know , there's always something to worry about . Really, there is always something to worry about . How many times have we talked about this ?
There is always bad news in the world , and there is also good news . News follows stock prices. When stocks fall , the news tends to show mostly bad things. But to me, if I know stocks are down, I feel like, " Well, I'll get better values." I have been doing this for 50 years . If someone doesn't tell me something to worry about , I feel anxious.
This is natural in this business. I say that jokingly, because I'm a Reagan man, you know , I was there at the time. I started at Merrill in 1981 . So, I remember, I remember very well what happened. I remember my feelings in 1981 , and I also remember what my situation was like by 1985. And a favorable wind blew for you.
The work we did gave me a favorable wind. We won't do that again now . We are not going to cut taxes. We are not going to promote that sector . We are now going in the opposite direction. Did the wind blow in your favor? Will we ever have a favorable wind again ? Values are a favorable wind, yes. Well, we've had 13 recessions and 13 recoveries since World War II .
Maybe we're getting one. If this is a recession, it's probably the most predictable. Look, I never know when we'll be gone, it's nice to know the future . I think I'll give it a go , it might help. I will be a good investor. I'll pay an extra five dollars for the Wall Street Journal next year . That really helps.
I can't predict the future. But this, this recession was very much expected, very much anticipated. Yes, he is right. Maybe it will come. I don't know. What he said is true. This recession was much anticipated. Maybe it won't come , who knows. Listen friends, this is not to be angry, but if you listen to top investors, they all talk the same.
They all, you know, Warren Buffett and Charlie Munger, say you should be able to calculate the value of a company on a piece of paper . That's it. And all of these economic models, I mean, if you look at our real estate deals, we always joke about real estate deals . I actually do this in an Excel sheet.
A single Excel sheet, I'll do it. A sheet of paper. Boom boom boom boom. And other people send me Excel sheets and they say, "This is 20 sheets." I mean, " What is this?" "Okay, okay, it has this ." No. You have to look smart. No. And do you know why they do that? Okay, look at all my research. I did it.
And that deal didn't work out . It's not my fault. And if the deal works out, look, it's because of me. Listen, keep it simple, you fool. The problem is that the average mutual fund has a turnover of 80% or more per year . That means 80% of their companies are bought and sold every year . If you do that , you can't tell me you're a long-term investor .
If you notice how this channel has changed over the last 2 years , my goal has shifted from finding a specific situation that is undervalued, to finding great companies that I can buy at a reasonable price. I have changed my mantra . Why? Because I'm lazy. I do n't like sitting around and going in and out of companies.
Would I still do that? Yes, I still buy some companies where I'm like, "You know what? I think this is so mispriced , I don't have to own it for the long term . I'm okay with buying it, watching it go up, and selling it at a certain point. But for the most part, I'm changing. Find good companies at good prices.
That's it. That's what I'm trying to do . That's what we're trying to do on this channel . Do you get that? Subscribe and send it to your stupid friend who doesn't understand it, because they'll probably argue with you, but when the bear market ends , they'll say I dumped stocks . You met him. Hey, remember that short guy on Everything Money?
He sounded like he was talking like that. Why don't we hear him again? Thank you so much for your time , guys.
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